Letter Regarding Clarification of Knight Trading Group's position on the Vendor Display Rule

September 4, 2001

Via Electronic Mail

Mr. Joel Seligman
Dean and Ethan A. H. Shipley University Professor
Washington University School of Law
1 Brookings Drive
Campus Box 1120
St. Louis, MO 63130

Re: Clarification of Knight Trading Group's position on the Vendor Display Rule

Dear Dean Seligman & Members of the Committee:

Knight Trading Group, Inc. ("Knight") wishes to clarify its position on the issue of retaining the Vendor Display Rule (the "Display Rule"). In our letter of August 27, 2001, Knight stated:

We support the competing consolidator model proposed by the Committee and believe the proposal will encourage competition and innovation. Knight, however, believes that the full benefits of a competing consolidator model cannot be realized as long as the national market system is premised on the current versions of the Quote Rule and the Display Rule and the Transaction Reporting Plan. Knight encourages the Commission to repeal the Display Rule and amend the Quote Rule and the Transaction Reporting Plan to reflect the market of today.

To ensure the accuracy of the report, Knight asks that the record clearly reflect that while we support the competing consolidator model proposed by the Committee, this support is contingent upon the Commission eliminating the current Display Rule and amending the Quote Rule and the Transaction Reporting Plan.

This position is premised on our belief that the Commission eviscerated the Display Rule when it actively encouraged industry participants to display their limit order books publicly to promote increased market transparency.¹ In response to this request, Knight was the first market maker to display its limit order book publicly on the Internet on Yahoo Finance. Therefore, I request that the report be amended to reflect in footnotes 225 and 249 and the accompanying text that Knight does not support the competing consolidator model if the current Display Rule is retained. We also ask that the report reflect this position in the Executive Summary and other sections that discuss the Committee's Recommendations.

Very truly yours,

Michael T. Dorsey
Senior Vice President, General Counsel
and Secretary

cc: Harvey Pitt, Chairman
Laura Unger
Isaac Hunt
Anette Nazareth
Robert Colby
Members of the SEC Advisory Committee on Market Information

Endnotes

¹ See Commission Roundtable on Limit Order Transparency (Apr. 17, 2000).

http://www.sec.gov/divisions/marketreg/marketinfo/ee.htm